Superstorm Sandy Is Causing New York And New Jersey Legislators To Reconsider Passing Legislation That Would Establish A Private Right Of Action For Bad Faith Claim Handling

Policyholders in New York and New Jersey presently have no private right of action against insurance companies for alleged violations of each state's respective statutory claim handling guidelines - New York's Unfair Claim Settlement Practices Act, N.Y. Ins. Law § 2601, and New Jersey's Unfair Claim Settlement Practices Act, N.J. Admin. Code tit. 11, §§ 2-17.6 and 2-17.7. Although the New York and New Jersey statutes each prohibit insurers from engaging in unfair claim settlement practices, neither allows insureds the right to enforce the laws or seek damages for a violation by filing a lawsuit against the insurer. Rather, the Insurance Department for each state are vested with the exclusive power of enforcement, and then only when an insurer engages in a pattern of violations demonstrating that the mishandling of claims is a general business practice. That may soon change...